Asia, Europe stocks slide on QE3 fears
AFPWASHINGTON/LONDON -- Massive U.S. Federal Reserve asset purchases are worrying its policymakers, with some wanting to wind them down before the jobs market heals significantly, according to official minutes released Wednesday.
February 22, 2013, 12:03 am TWN
The concerns sparked wide-ranging losses on markets across Europe and Asia on Thursday.
The Fed introduced a third round of its asset-purchase scheme, known as Quantitative Easing 3 (QE3), in September and said it would not take its foot off the pedal until unemployment had fallen and the economy was strong enough.
Minutes of the Jan. 29-30 Federal Open Market Committee (FOMC) monetary policy meeting showed the asset purchases, known as quantitative easing, were under some pressure to be scaled back.
Yet recent economic data and looming across-the-board government spending cuts suggest the feeble economy would not be strong enough for the Fed to ease its ultra-loose monetary policy anytime soon.
The QE debate first surfaced in the minutes of the December FOMC meeting, when the panel agreed to launch an open-ended US$45 billion a month program of buying longer-term Treasury securities and continued its US$40 billion per month purchases of mortgage-backed securities.
At their January meeting, the FOMC agreed to continue the US$85 billion QE program until the labor market improves “substantially” in a context of price stability around 2 percent.
European stock markets slid on Thursday over concern about a possible end to U.S. stimulus measures and as data revealed slumping business activity across the eurozone, while London came sharply off five-year highs.
Shares in banks led indices lower, overshadowing upbeat company news across other sectors.
Approaching midday, London's FTSE 100 index of top companies had slumped by 1.73 percent to 6,288.25 points — a day after surpassing 6,400 for the first time in more than five years on the prospect of more cash stimulus from the Bank of England.
Frankfurt's DAX had shed 1.84 percent to 7,584.60 points and in Paris the CAC-40 index had dropped 1.87 percent to 3,640.46.
Milan dived 2.91 percent to 16,039.55 points, also hit by concerns over the outcome of upcoming legislative elections in Italy, traders said.
The leading Milan stock index, the FTSE Mib, was pulled down by banking stocks and by shares in the Mediaset company, owned by Silvio Berlusconi who is bidding to return to power in the elections.
European “equity markets are declining today, joining the global sell-off,” said Gekko trader Anita Paluch.